The 51-49 joint venture partnership between the Tatas and the AirAsia group had started operations in 2014 as a low-cost carrier in the country
In a major step to consolidate the group’s aviation business, Tata Sons--the holding company for the salt to software conglomerate--has increased its stake in AirAsia India to 83.67 per cent from 51 per cent till now. The Tata group
bought 32.67 per cent stake from AirAsia Berhad at Rs 276.29 crore, the Malaysian airline told the Kuala Lumpur-based exchange Bursa on Tuesday.
also has a call option on the remaining 16.33 per cent stake that its partner holds in the airline. A person aware of the development said Tatas would exercise the right, thereby giving a total exit to the Tony Fernandes-owned group by the middle of 2021.
The 51-49 joint venture partnership between the Tatas and the AirAsia group had started operations in 2014 as a low-cost carrier in the country.
Industry observers said this was the first among many steps by the Tatas towards consolidation of its aviation business. Chairman N Chandrasekaran had earlier said that consolidation is a route that the group would follow. “We have far too many companies
in the Tata group
and some level of consolidation is essential,” Chandrasekaran had told Tata Review, the in-house magazine of the group.
Beside AirAsia India, Tatas own 51 per cent stake in full service carrier Vistara.
It is also in the race to acquire state-owned Air India.
AirAsia group cited disruption caused by Covid-19 pandemic as a reason for planning to quit the JV. Calling India a non-core market, it said the proceeds from the sale would be used to re-organise its business in Malaysia.
AirAsia, once the poster child of a low-cost airline revolution in Asia, is seeking to raise as much as 2.5 billion ringgit ($600 million) by the end of the year as coronavirus disrupts travel globally. The Subang, Malaysia-based budget carrier, posted its biggest-ever quarterly loss in August and recently shut down its Japanese subsidiary.
AirAsia and Singapore Airlines
were the first two foreign investments in the aviation sector in India after the government in power had permitted foreign direct investment of 49 per cent by foreign airlines
in domestic carriers. Following the decision, Abu-Dhabi-based Etihad bought 24 per cent in Jet Airways while AirAsia India and Singapore tied up with Tatas to set up new airlines- AirAsia India and Vistara.
“Since the start of the Covid-19 pandemic, aviation has been one of the hardest hit industries. Airlines
around the world have cancelled flights and grounded planes and AAI is no exception. Due to this, the directors expect further capital requirements for AAI. As India is a non-core market for AirAsia (being a non-ASEAN country), the company will continue to regularly re-assess its business strategies and dispose of non-core investments to augment its liquidity,” the airline said.
along with Bo Lingam, president (airlines) at AirAsia group, as well as Banmali Agrawala, chairman AirAsia India, and Sunil Bhaskaran, CEO of AirAsia India, have addressed employees on the change in ownership, according to sources.
Fernandes is learnt to have said that after AirAsia has brought up the child, it’s up to the Tatas now to handle it in adolescence.
The airline has never made money since inception in what is one of the world’s most difficult markets, where high fuel taxes and cut-throat fares often make operations unprofitable. It has also grappled with ownership and control issues. In 2017, the Central Bureau of Investigation filed an FIR alleging that Fernandes had tried to bribe Indian government officials to get faster approval for foreign operations. The carrier, which has a market share of 6.8 per cent, employs more than 3,000 in the country.
AirAsia India’s initiative to break away from its Malaysian partner had started a year ago. AirAsia India’s commercial unit now has a full-fledged office in Gurugram and has established a crew training unit in Bengaluru.
The airline will have its own website from February, which is being built by US-based travel technology company Navitaire. Tata Consultancy Services is working on a crew scheduling software, which till now was handled from Kuala Lumpur.
Based on assurance from the Tata Group, AirAsia India management has conveyed to its travel agent partners, aircraft lessors, and employees that there’s no threat of the airline shutting down.
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